There is a tremendous amount of uncertainty in the insurance market right now. While some, like Willis Towers Watson, have done their best to forecast a number of possible scenarios and their respective impacts on the insurance industry, there is no way to know for sure what will happen.
This uncertainty creates challenges for insurers and insurtechs alike. We recently covered the differences between these challenges, and their impacts. But there’s another, more hopeful, conversation to be had here as well.
It’s centered around this question: are there opportunities for insurtechs and insurers to support each other in this challenging environment? Despite their differences, insurtechs and incumbent insurers are the two pieces of the insurance industry, and increased collaboration would likely result in better products and services for customers as well as improved financial outcomes for both business types.
Insurers are struggling with digital capabilities
As the COVID-19 crisis forces your customers, employees, and supply chains into digital channels and new ways of working, now is the time to ask yourself: What are the bold digital actions we’ve hesitated to pursue in the past, even as we’ve known they would eventually be required? Strange as it may seem, right now, in a moment of crisis, is precisely the time to boldly advance your digital agenda. - McKinsey
It didn’t come as a surprise that one of the key struggles for insurers right now is their reliance on legacy technology and processes. While none of us can remember the last time we couldn’t check our bank account balance through an app, many insurers haven’t developed a digital platform through which customers can apply for insurance, contact their insurer, or manage their policies.
Cloud based services and products are here and they’re certainly here to stay - and many insurers need to catch up to this reality because it’s completely driven by the fact that this is what customers want.
When COVID-19 forced everyone online, consumerism refocused as well. As many first time insurance customers searched for policies to help ease their financial concerns and uncertainties, some incumbent insurers missed out on the surge that insurtechs reported. With many young digital insurers reporting more customer interest and inquiries than ever before, it became clear that digital distribution methods, and perhaps some revamped marketing, is necessary in order to attract a new generation of insurance customers.
Insurtechs are struggling with funding
Within the insurance industry, the insurtech business model has certainly demonstrated strong resiliency, and for some increased success, during these uncertain times. Despite a surge in interest, insurtechs are struggling with challenges of their own. A recent report found that global insurtech funding has been slashed by 54 percent in Q1 2020, the first significant drop after consistent growth over consecutive quarters. This is despite an increase in the number of insurtech deals continuing to increase.
This poses a serious challenge for many insurtechs who rely on funding to expand, improve products, and sustain their growth. This is particularly difficult for younger companies that are in the initial stages of funding.
Insurtechs like Fabric, Jenny Life, and Getsafe are reporting more engagement than ever before. Customer interest has never been higher, but without the financing to deliver and scale their products in the market, many insurtechs will struggle to capitalize on this momentum.
An opportunity for the two sectors to help each other out
Insurtechs are in need of funding and insurers are in need of a digital makeover - and they both need it now. While investments and partnerships between the two sectors of the insurance industry have existed for some time, there has never been a more opportune moment for them to work together to address their respective problems and improve the industry as a whole.
Forbes recently listed insurance distribution and marketing as one of the industry functions that badly needed a digital makeover. Insurtech provides an opportunity for insurers in this regard. Not only can they learn from the successful insurtechs that are gaining tremendous traction with customers at this time, there is also the chance for them to partner with SaaS oriented insurtechs in order to improve their own internal and outdated processes.
For many insurtechs, this has been a moment of validation. The world went online and new insurance customers immediately began turning towards digital insurance providers - many of which are insurtechs. But in order to sustain growth and continue to scale, many insurtechs still rely on funding and support from venture capitalists and insurance partnerships. This is an opportunity to reevaluate partnership opportunities that could breathe life into incumbent insurers and propel younger companies forwards.
#BetterTogether means showing support during COVID-19
During a difficult time such as this, the insurance industry as a whole has demonstrated a tremendous ability to rally and show up for the communities and individuals within their networks.
Insurers like Chubb and MassMutual have donated millions, or billions in MassMutual’s case, to support those who are most affected by COVID-19 as well as their own people. Insurtechs like Oscar Health, Zego, and more have offered temporary free coverage and set up resources to help individuals protect themselves and their loved ones. Around the world, insurers have returned millions in unused premiums to customers. As an industry, insurance has stepped up to the plate, and now it is time for companies to step up for each other as well.
Not only can increased collaboration between insurtechs and insurers help address some of the challenges facing them in today’s difficult situation, it can help improve the industry as a whole for insurers, insurtechs, and, most importantly, their customers.
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